Ask Me Help Desk - Can I benefit the India-USA Tax treaty ?

Hi, I had come to USA on L1-B visa. I spent around 150days in USA and then went back. My sponsor for L1-B visa is L&T Infotech (USA) but ultimately the salary is borne by Larsen and Toubro Limited the sister company based in INDIA. As per the Tax treaty read in Pub. 901 Pg 7 of 52 which goes...

Income that residents of India receive for personal services performed in the United States as employees (dependent personal serv-ices) is exempt from U.S. income tax if the re-sidents meet three requirements:
[1] They are present in the United States for no more than 183 days during the tax year.
[2] The income is paid by, or on behalf of, an who is not a resident of the United States.
[3] The income is not borne by a permanent establishment, fixed base, or trade or business the employer has in the United States.

In the current scenario, I meet [1] as my stay is only 150days. I also meet [2] in the sense that my income is paid on behalf of a sister company - Larsen and Toubro Limited, based in INDIA, who is not a resident of the United States.

Could someone throw light on this subject - Can I benefit the India-USA Tax treaty ?

Quote:

Originally Posted by veiloffright

Hi, I had come to USA on L1-B visa. I spent around 150days in USA and then went back. My sponsor for L1-B visa is L&T Infotech (USA) but ultimately the salary is borne by Larsen and Toubro Limited the sister company based in INDIA. As per the Tax treaty read in Pub. 901 Pg 7 of 52 which goes .......

Income that residents of India receive for personal services performed in the United States as employees (dependent personal serv-ices) is exempt from U.S. income tax if the re-sidents meet three requirements:
[1] They are present in the United States for no more than 183 days during the tax year.
[2] The income is paid by, or on behalf of, an who is not a resident of the United States.
[3] The income is not borne by a permanent establishment, fixed base, or trade or business the employer has in the United States.

In the current scenario, I meet [1] as my stay is only 150days. I also meet [2] in the sense that my income is paid on behalf of a sister company - Larsen and Toubro Limited, based in INDIA, who is not a resident of the United States.

Could someone throw light on this subject - Can I benefit the India-USA Tax treaty ?

You must have received W2 form stating your income and taxes withheld. If yes, it is U.S. source income. File return as nonresident and disclose all the income received in the U.S.

If you did not get W2, and also you did not submit W4 to your employer, then give more details about how you are being paid.

Quote:

Originally Posted by MukatA

You must have received W2 form stating your income and taxes withheld. If yes, it is U.S. source income. File return as nonresident and disclose all the income received in the U.S.

If you did not get W2, and also you did not submit W4 to your employer, then give more details about how you are being paid.

Yes I did receive W2, but I querried with my employer and they confirmed that I can apply for the treaty as the taxes withheld were because I did not apply for tax exemtion.

As a L1-B visa holder I have been transferred from Company A (Foreign Employer - INDIA) to Company B (Resident Employer - Sister of Company A in USA) to perform software development on behalf of Company A in USA. Company B is paying me the wages, but Company B is getting reimbursed by Company A. As per this Company B cannot claim deduction for paying me wages. Also being less than 183 days I have to pay taxes on foreign income back in INDIA. Hence to avoid double taxation, can I use this treaty ? Do I need to get a statement from Company B that they are getting reimbursed by Company A and hence they cannot claim deductions for wages paid to me ?

This seems quite straight but am not able to come to a conclusion. Can I get some concrete answer ?

--Thanks

There is no tax treaty benefit for income on L1 if it is received from the U.S. sources. L1 is work permit visa. It is not a student visa or J1 visa to students, professors or researchers.

Quote:

Originally Posted by MukatA

There is no tax treaty benefit for income on L1 if it is received from the U.S. sources. L1 is work permit visa. It is not a student visa or J1 visa to students, professors or researchers.

I know companies which are india based and they provide L1 visa for their employees.
Does that mean they are a US based company??
Treaty says that income should not be bourne by a company which is is permanent resident of US.Dont you think that in this case the company employees can claim the India - US tax treaty benefit?

You will pay tax in the US on the wages paid in the US (on your W2).
When you file in India, claim credit for taxes paid in the US. It can't be other way round.

If a US citizen works in India, he/she pays taxes in India and then claim foreign tax credit by filing Form 1116.